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The Pakistan Credit Rating Agency Limited
Press Release

Date
01-Oct-21

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

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PACRA Upgrades the Entity Ratings of Master Wind Energy Limited

Rating Type Entity
Current
(01-Oct-21)
Previous
(08-Apr-21)
Action Upgrade Maintain
Long Term A+ A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Master Group, pioneers of foam products, has set up a 52.8MW wind power plant – Master Wind Energy Limited. Plant achieved COD on14th October 2016, the project is established under the Policy for Development of Renewable Energy for Power Generation, 2006 which offers a guaranteed internal rate of return, cost indexation, and passthrough tariff structure. Working capital requirements are fulfilled through in-house adequate cash flow generation. Free cash flows of the Company are in a comfortable position to make debt repayments. Master Wind has repaid ~46% of its debt on time without availing benefit of forbearance period, facet of strong financial profile and working capital management. The company’s reserve build-up mechanism, DSRA fully funded through cash and PSRA funded via SBLC providing coverage of more than one time on its financial obligations till maturity, provides comfort to the ratings. Though, the company signed the MoU but the Master Agreement and EPA Amendment Agreement have not been executed yet with CPPA-G (on behalf of Government of Pakistan). The project revenues and cash flows are exposed to two main risks. First; wind risk. Under the upfront tariff regime, any variability in wind speeds is to be borne by the Company, due to which its cash flows may face seasonality. However, historical wind speeds provide comfort that Master Wind would be able to generate enough cash flows to keep its financial risk manageable. Second; operational risk. Comfort is drawn from General Electric International Inc. – the O&M operator – having both international and local market experience. If the Company maintains its availability as per contract and is ready to deliver electricity to CPPAG, CPPA-G is liable to pay the whole tariff even in case of missed volumes. The Government of Pakistan has provided a sovereign guarantee against dues from CPPA-G.
Upholding operational performance in line with agreed performance levels is important. Improving, indeed aligning, build-up of DSRA from internal sources, receipt pattern from power purchaser, debt repayment behavior and liquidity cushion would impact the directions of ratings. External factors such as any adverse changes in the regulatory framework and weakening of financial profile may impact negatively.

About the Entity
Master Group has a long history spanning over 50 years. The flagship company Master Enterprises (Pvt.) Ltd established in the year 1963, deals in foam products. The Group gradually diversified in various industries with operations across textile, engineering, automobile and retail sector. Master Wind Energy Limited, incorporated in May 2005, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The 52.8MW wind farm is set up in Jhimpir, Sindh. The total cost of the project was USD 132.3mln. Debt financing constitutes 75% of the project cost i.e. USD 99.2mln, which is financed from local and foreign financial institutions equally. The project was commissioned on 14th October 2016. Master Wind’s Board of Directors (BoD) comprises eight members, including the Chairman and Managing Director. Out of these, four are non-executive, two are independent and two are executive directors. Whereas five board members represents Master group. Mr. Shahzad Malik is the MD of Master Wind since 2011, assisted by an experienced management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.